Sterling was off to a rough start for the week, but the upcoming set of top-tier U.K. data could be enough to prop it back up. What do you guys think?
Long GBP/CAD Idea
Happy Pip previously pointed out an inverse head and shoulders breakout on this pair, which signaled that an uptrend is in the cards. Price has since retreated to the broken neckline after the BOE’s “dovish hike” and on U.K. political troubles.
However, the area of interest at the former resistance level and the newly-forming ascending trend line is holding so far, and the pair is showing a bit of bullish momentum.
Of course this could also be attributed to profit-taking from the short positions earlier this week by pound traders seeking to reduce their exposure ahead of the top-tier data lined up. After all, inflation is expected to tick higher once more while jobs and spending could also improve.
I haven’t entered any orders just yet since I’m still waiting to see how CPI readings might turn out and how traders would react to the numbers. This should provide more clues as to whether Brexit issues would likely to keep overshadowing fundamentals or not.
If I’m able to go long, I’ll aim for the swing high near the 1.7200 handle as my target with a stop below the 1.6600 mark. This should give me roughly 2:1 in return-on-risk, depending on where I’m able to hop in.
As for the Loonie, stalling upside momentum for crude oil could also force the correlated currency to retreat this week, especially since Canadian CPI data due later on are expected to reflect weaker price pressures. This could reinforce views that it would take longer before the BOC to hike again.
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